RETAILER WHSmith was being warned yesterday to expect a backlash from shareholders over a £2.6m "golden hello" package for new chief executive Kate Swann.

The National Association of Pension Funds (NAPF) has advised its members to vote against the pay package at the company's annual meeting on Thursday.

The remuneration package for Ms Swann comes at a sensitive time after a WHSmith warning on profits earlier this month following poor Christmas sales.

The high-street retailer responded to the poor performance by launching a wide-ranging review of operations. It said job cuts among 1,000 office staff at Swindon and 200 employees in London had not been ruled out.

Ms Swann, who quit as managing director of catalogue retailer Argos to take charge at WHSmith, is due to receive a basic salary of £475,000.

According to WHSmith's annual report, directors have agreed a minimum bonus of £220,000 that could increase to £475,000 after Ms Swann completes three years with the company.

In addition, she will receive share options worth three times her annual salary - netting her £1.43m.

And the board has agreed to pay her £500,000 compensation over two years for the loss of benefits when she resigned from her post at Argos.

An Napf spokesman urged shareholders to block the pay deal on the grounds that it was "insufficiently tied to performance criteria".

Ms Swann, who is on a one-year rolling contract, has taken personal responsibility for driving higher sales at the 550-strong chain of WHSmith stores in the UK.

She took over control of UK retail operations in the wake of the profits warning this month, replacing Beverley Hodson, whom she also beat to the post of chief executive.

Flat like-for-like sales for the 17 weeks to December 31 led analysts to slash their full-year profits forecasts for WHSmith by nearly 40% to £65m.

Other details in the annual report reveal WHSmith chairman Richard Handover was paid £554,000 including bonuses last year.

Ms Hodson picked up £437,000 including benefits - in addition to the £112,200 she was paid in November after being passed over for the post of chief executive.